Plans for new local mining taxes angers central government, CS Najib Balala reveals

NAIROBI, KENYA: Local authorities along the coast plan to introduce new taxes on mining and oil exploration despite resistance from the country’s central government.

Kwale, Lamu and Taita Taveta counties along the country’s Indian Ocean coastline have proposed the new taxes on investors exploiting minerals, gas and oil in these areas, proposals which the Government said could scare away investors.

The counties want more revenue from the exploitation of resources in their regions to improve services and create jobs.

“We want these mining companies to help us develop our county’s social and economic infrastructure ... We hope they will cooperate when the bill is passed. They are aware because we involved them,” Salim Mvurya, the governor of Kwale county told Reuters on Tuesday.

PROVEN DEPOSITS

Kenya has proven deposits of titanium, gold and coal and is also estimated to hold significant deposits of copper, niobium, manganese and rare earth minerals. But Mining Cabinet Secretary Najib Balala said taxation of the mining sector was a function of the central government.

The CS has already presented a new mining Bill to Parliament, seeking to increase royalties to give the State a greater share in profits from the sector. “It is our responsibility as the mining ministry at the national level to increase royalties in the mining sector ... Mining is a function of the national government and the constitution is very clear on this,” Balala told Reuters.

If passed by the local assemblies in the respective counties, this will test Nairobi’s ability to challenge local government decisions.

In Kwale, the Bill proposed by Mvurya envisages a new annual business permit levy of $11,220 for mining companies with more than 50 employees. Medium-sized mining companies with up to 50 employees will be charged $754.

The Bill, which is expected to be presented to the county assembly for a vote by next week, also proposes a $56 levy for every tonne of sand containing titanium ore.

Australia’s Base Resources mines titanium in Kwale, where it employs 2,200 people, and has so far produced 300,000 tonnes since it started mining in October last year. “Certain functions are not devolved to counties. The constitution determines how the administration of minerals must be treated,” Simon Wall, Base Resources external affairs manager, said in an email to Reuters. Further north in Lamu county, authorities want to introduce a new levy of $63 per acre of land under exploration for oil and gas in the area. Kenyan companies will pay $19.

Australia’s Pancontinental Oil and Gas, which is exploring oil in Lamu, was not immediately available to comment. Oil and gas discovery within East African region has attracted the attention of global oil firms and potential investors especially in Uganda and Kenya.

Potential investors

DHL Energy Sector President Steve Harley recently said that East Africa is now receiving its share of attention from global oil companies and potential investors.

“Oil discoveries in Uganda and Kenya have also added to the excitement in the sector as new players look to enter these markets, including some of the largest independent and international oil companies, otherwise known as the super majors, who are now also witnessing the potential in this region,” Harley said.

He said in addition to East Africa, both Namibia and South Africa are also on the radar of investors within the sector.

PwC’s Africa Oil & Gas review titled “From promise to performance” released in June last year, revealed that Africa currently supplies approximately 12 per cent of the world’s oil and boasts untapped reserves estimated at 8 per cent of the world’s proven reserves.